Japanese Stocks Fall as Rout in U.S. and Europe Spreads to Asia

  • Traders betting 74% chance Fed will raise U.S. rates this week
  • BOJ's large manufacturers Tankan reading beats estimates

Japanese stocks fell, with the Topix index closing at the lowest level in more than a month, as a rout in U.S. and European equities spread to Asia. Energy explorers led declines.

The Topix dropped 1.4 percent to 1,527.88 in Tokyo, its lowest close since Nov. 2, as all but one of its 33 industry groups retreated. The Nikkei 225 Stock Average lost 1.8 percent to 18,883.42. U.S. and European stocks slumped on Friday as a rout in oil prices and ructions in the junk-bond market boosted investor anxiety ahead of the Federal Reserve’s final meeting of 2015.

“Sentiment at the moment is pretty weak,” said Matthew Sherwood, head of
investment strategy at Perpetual Ltd. in Sydney, which manages about $21
billion. “We’re coming up to the first U.S. rate hike in nine years and we
have an environment in commodities where prices continue to decline. The recoveries in Europe and Japan just haven’t taken off. The U.S. looks solid enough but it’s still the weakest recovery in history.”

Japan, U.S. December share move
Japan, U.S. December share move

Toyota Motor Corp. fell 2.9 percent, Mitsubishi UFJ Financial Group Inc. lost 1.8 percent and SoftBank Group Corp. dropped 2.6 percent to be the biggest drags on the Topix. Inpex Corp. slumped 2.9 percent as oil explorers declined the most among the Topix industry groups. Brokerage Nomura Holdings Inc. retreated 3.1 percent, the most since Sept. 29.

U.S. Futures

E-mini futures on the Standard & Poor’s 500 Index added 0.5 percent after the underlying measure dropped 1.9 percent on Friday to cap the worst week for U.S. stocks since August. The Stoxx Europe 600 Index fell 2 percent.

A wave of risk aversion swept over markets Friday as OPEC’s decision to scrap output limits sent crude oil prices to the lowest level since 2008 in London. Asset managers slid in the U.S. after a high-yield mutual fund run by Third Avenue Management suspended redemptions. They were then joined by Stone Lion Capital Partners, fueling concern over stress in the high-risk debt market.

The credit-market turmoil comes as traders price in 74 percent odds that the Fed will raise interest rates on Wednesday, ending the era of near-zero borrowing costs. Tightening policy would solidify the Fed’s divergence from other major central banks, with policy makers in Europe and Japan still emphasizing measures to support growth.

The Bank of Japan’s fourth-quarter Tankan survey showed a measure of confidence among large manufacturers held at 12, beating economist estimates for it to slip to 11. The index is forecast to fall to seven in March. A positive number means there are more optimists than pessimists among manufacturers.

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